(Reuters) - New Zealand's Fletcher Building <FBU.NZ> scrapped their proposed takeover of Steel & Tube Holdings <STU.NZ> on Monday after its sweetened offer was rejected, sending the target's shares from a four-month high to their steepest fall in two months.
The country's largest builder launched its bid earlier this month but Steel & Tube said it significantly undervalued the company and would take time to clear regulatory hurdles.
The enhanced NZ$315.4 million ($205 million) offer, at NZ$1.90 per ordinary share in cash plus a special dividend up to NZ$0.05 per ordinary share upon deal completion, was about 11.8 percent higher than the previous bid.
Auckland-based Fletcher blamed a "lack of support from Steel & Tube's board to progress the proposal in a timely manner" for their withdrawal of the proposal.
Steel & Tube said its advisers' view was of an intrinsic value between NZ$1.95 and NZ$2.36 per share for the company.
"The permitted dividend does not adequately compensate shareholders for the extended timeframe realistically required to seek regulatory approvals," Wellington-based Steel & Tube said in a statement.
The revised non-binding offer from Fletcher "does not prevent higher value approaches from other interested parties", Steel & Tube Chairwoman Susan Paterson said in the statement.
The troubled steel distributor in August reported a 60 percent slump in annual profit after writing down the value of its assets, exiting its plastics business and flagging impairment charges in May.
"The steel industry in New Zealand has had its issues over the past few years and STU has borne the brunt of that, so I would be surprised if any major offers come through," said Grant Davies of investment advisors Hamilton Hindin Greene.
"It is up to the Steel & Tube board now to show why that (Fletcher offer) wasn't a sufficient offer."
Steel & Tube shares had advanced over 15 percent after the company's announcement and then declined 6.7 percent after Fletcher pulled the plug on the deal.
(Reporting by Devika Syamnath and Aditya Soni in Bengaluru; Editing by Stephen Coates)
